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Sun 7 Dec 2008 04:00 AM

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Iceland’s financial crisis sends Viking descendants back to Norway for jobs

Almost 1200 years after a viking chief left Norway to found Reykjavik, Iceland's crisis is forcing his descendants home.

Almost 1200 years after viking chief Ingolfur Arnarson left Norway to found Reykjavik, the crisis engulfing Iceland is forcing his descendants home.

"There are no jobs here," said Baldvin Kristjansson, an 18-year-old former container repairman from western Iceland, at a European job fair in Reykjavik.

"I'm going to move away and go to Norway."

The Atlantic island of 320,000, suffering from its worst financial crisis since gaining independence in 1944, faces the biggest exodus in a century. Iceland's $7.5bn economy may shrink about 10 percent next year, according to the International Monetary Fund, which is helping provide a $4.6bn bailout package.

About half of Icelanders aged between 18 and 24 are considering leaving the country, Reykjavik-based newspaper Morgunbladid said, citing a survey of 1117 people between Oct 27 and Oct 29.

"Tens of thousands" will depart, estimated Jesper Christensen, chief analyst at Danske Bank A/S, the biggest lender in neighbouring Denmark.

Iceland's biggest wave of emigration was in the late 1800s and early 1900s. Then, 15,000 out of a total population of 70,000 left, joining a flow to North America from countries including Norway, Sweden and Ireland. A hundred years later, Iceland's economy is struggling after the nation's banking system collapsed under the weight of its foreign debt last month.

Inflation surged to an 18-year high of 17.1 percent in November following a currency collapse that drove up prices. A protest against the government turned violent last week as police used pepper spray to battle activists in front of Reykjavik's main police station.

Unemployment is forecast to rise to 7 percent by the end of January from a three-year high of 1.9 percent in October, the country's Labour Directorate estimates.

"A lot of people are registering unemployed," said Valdimar Olafsson at European Employment Services in Reykjavik.

"It's very hectic and Icelanders are asking for jobs, especially in Norway."

Norse settlers arrived in Iceland around 874 on sail-powered wooden longships. The country came under Norwegian control in 1262 and then under Danish dominion in 1380. It gained autonomy 90 years ago on Dec 1 and became fully independent from Denmark in 1944. The Danes and Norwegians, along with Germans and Poles, returned to pluck Icelandic talent at a job fair on Nov 21 and 22. It drew 2500 people.

Neither country has been fully spared from the effects of the global crunch. Denmark's economy will shrink 0.5 percent next year, according to the Paris-based Organisation for Economic Cooperation. Norwegian economic growth more than halved to 0.2 percent in the third quarter.

Both remain in much better shape than Iceland, though, and Norwegian and Danish companies are seeking skilled workers.

"Iceland is more or less in a state of coma," said Sigrun Thormar, who runs a consulting business for Icelanders moving eastward. "There'll be an increase in the number of Icelanders seeking work in Denmark."

Danish unemployment is 1.6 percent. In Norway, the jobless rate rose to 1.8 percent last month from 1.7 percent the previous month. Norway's Labour and Welfare Administration, or NAV, expects unemployment to stay below 3 percent over the next two years.

Kristiansand-based Teknova, a research institution looking for scientists, and Billingstad-based Aibel AS, a provider of products and services to the oil and gas industry, are among Norwegian companies seeking Icelandic workers.

In total, NAV has 350 vacancies posted, according to Ragnhild Synstad, an adviser at NAV EURES who attended the job fair.

"I have been absolutely swamped with employers that are interested," said Synstad. "The response was overwhelming. We heard some very sad stories about families who have lost everything."

Stefan Gudjonsson, 37, who was let go from his job as an account manager at an information technology company, said he may have to leave his six-year-old son behind for work elsewhere. "I don't like the look of things right now and also worry about what has yet to happen," he said.

"People are trying their best to be optimistic, but the prospects look anything but good."

This article is courtesy of Bloomberg.

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